Full & Final settlement advice

budg13

Hi everyone, I've read through a few different threads and stories here and would really appreciate some advice on mine.

I have unsecured debts totaling circa £40,000 across credit cards, loans and overdrafts.

These range from £12,000 loans to £1,500 overdrafts, and a lot in between.

I don't have any great excuses or mitigating circumstances as to why I've amassed so much, but I am where I am and working through it with my partner and my family. (I mention this because I note cases of domestic abuse etc, and want to be clear this is my doing) Put simply I over-committed and borrowed further to conceal debt etc.

The point at which I'm at is I have opened up about this as of January this year by telling my wife. We have a joint mortgage and so on etc. I then spoke to Stepchange (next to useless), then to Citizens' Advice (very helpful). Effectively, I entered into a DMP with 9 different creditors where I produced a budget form and negotiated reduced monthly payments with each. This was in April/May. I am now at a stage where I haven't missed any (reduced) payments but probably need to agree a more "long term" solution with the creditors.

(In truth, I never actually missed minimum payments before entering the DMP, it just got to a point where I could no longer borrow further, and couldn't meet my minimum payments.)

Because CAB (as a licensed debt advisor) produced the budget and wrote to creditors on my behalf, the creditors effectively know about one another and to what extent my debts are (as of April 2024 at least)

Some creditors are more "insistent" on finding a solution than others, shall we say. I have spoken to CAB again and the "advice" that they are not allowed to give officially is to write to creditors to try and offer a Full & Final Settlement.

My thought process was to come here, find a template letter and write to the more insistent creditors with a 50-60% offer so I can move on and tackle the larger debts. Thus far, none have defaulted and none are sold on, or with third parties.

My question really is, is there any merit in writing to my creditors to request CCAs? To either buy time, space, or to put some onus on them and potentially end up with much lower settlement figures? Or is that a bit bonkers given my arrangements so far?

In potentially irrelevant news, I have been saving towards a solution and have circa £12,000 put aside in order to make settlement offers, but am keen to come up with an efficient a plan as possible.

Any help or advice would be greatly appreciated. Thank you in advance

sourcrates

CCA`s may be a good idea, depends on their age, however settlement at this stage is a non starter, you said yourself, non of your debts have defaulted, so you are still technically bound by the credit agreement for each account.

That means the full balance is still payable.

An account must default and be sold on and have at least some history of DMP payments before settlement offers are taken seriously.

The only reason these offers are made is because debt purchasing companies buy these accounts in bulk, for pennies in the pound, so can afford to discount heavily later on.

ManyWays

Unless the accounts are extremely old, there is little point in asking for a CCA agreement until the debts are sold, or until you are being threatened with court action. 

Posting a Statement of Affairs would help: https://www.stoozing.com/soa.php

budg13

Thanks for the replies so far, it ha helped me understand my options a little better.

I've also done an SOA as suggested - apologies in advance for the formatting;

[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]

Number of adults in household........... 2

Number of children in household......... 2

Number of cars owned.................... 2[b]

Monthly Income Details[/b]

Monthly income after tax................ 2250

Partners monthly income after tax....... 850

Benefits................................ 202.92

Other income............................ 0[b]

Total monthly income.................... 3302.92[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 864

Secured/HP loan repayments.............. 228

Rent.................................... 0

Management charge (leasehold property).. 0

Council tax............................. 149

Electricity............................. 133.5

Gas..................................... 0

Oil..................................... 0

Water rates............................. 85

Telephone (land line)................... 0

Mobile phone............................ 12

TV Licence.............................. 13.25

Satellite/Cable TV...................... 0

Internet Services....................... 25

Groceries etc. ......................... 300

Clothing................................ 20

Petrol/diesel........................... 0

Road tax................................ 41

Car Insurance........................... 55

Car maintenance (including MOT)......... 250

Car parking............................. 0

Other travel............................ 0

Childcare/nursery....................... 450

Other child related expenses............ 10

Medical (prescriptions, dentist etc).... 0

Pet insurance/vet bills................. 35

Buildings insurance..................... 30

Contents insurance...................... 0

Life assurance ......................... 63.75

Other insurance......................... 0

Presents (birthday, christmas etc)...... 20

Haircuts................................ 10

Entertainment........................... 10

Holiday................................. 0

Emergency fund.......................... 0[b]

Total monthly expenses.................. 2804.5[/b]

[b]

Assets[/b]

Cash.................................... 0

House value (Gross)..................... 340000

Shares and bonds........................ 0

Car(s).................................. 1000

Other assets............................ 0[b]

Total Assets............................ 341000[/b]

[b]

Secured & HP Debts[/b]

Description....................Debt......Monthly...APR

Mortgage...................... 240000...(864)......1.9

Hire Purchase (HP) debt ...... 12000....(228)......6.9[b]

Total secured & HP debts...... 252000....-.........-   [/b]

[b]Unsecured Debts[/b]

Description....................Debt......Monthly...APR

Overdraft......................1800......100.......39.9

Overdraft......................1800......26.5......0

Card 1.........................10000.....101.......0

Loan 2.........................13500.....159.......0

Loan 1.........................6000......40.88.....0

Card 3.........................1200......15........0

Card 2 ........................3000......34........0[b]

Total unsecured debts..........37300.....476.38....-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 3,302.92

Expenses (including HP & secured debts). 2,804.5

Available for debt repayments........... 498.42

Monthly UNsecured debt repayments....... 476.38[b]

Amount left after debt repayments....... 22.04[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 341,000

Total HP & Secured debt................. -252,000

Total Unsecured debt.................... -37,300[b]

Net Assets.............................. 51,700[/b]

[i]Created using the SOA calculator at www.stoozing.com. 

Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

RAS

The absolute basic is that you need a new basic bank account (there's no credit check) unless you owe nothing to your existing current account holder or to any company in the same banking group.

Are any of the existing debts jointly owed?

Does your wife owe anything else in her own right? 

It may make sense for her to also have her own basic bank account.

budg13

RAS said:

The absolute basic is that you need a new basic bank account (there's no credit check) unless you owe nothing to your existing current account holder or to any company in the same banking group.

Are any of the existing debts jointly owed?

Does your wife owe anything else in her own right? 

It may make sense for her to also have her own basic bank account.

Ok so the first think I/we did was set up a new joint bank account. We already had one, and although it was not in any arrears, it was with one of the banks that am in debt with.

No debts are jointly owned, they're all mine. She doesn't owe anything at all.

She also has her own basic bank account.

RAS

You are borderline financially. The debt charities wouldn't offer a DMP because you are currently solvent on a monthly basis. 

So you need to decide between you whether you default and pay off a DMP, or whether you want to knuckle down and clear this without the defaults? If you're aiming for the latter, then clear that expensive OD and check what rate you are paying for the other one. 

It is important that you do not have joint bank accounts, as that links you in the financial world. So your high debt and defaults wreck her credit records. So close the joint one.

Once you have a new basic account where you have no debts, if you are going to DMP transfer your income and the essential DDs to your new account .

First check with HR about dates when they need notice to reallocate your salary, then manually move the DDs. Do not use the switch facility as that will set up all the DDs paying your creditors and you are back to square one.

budg13

RAS said:

You are borderline financially. The debt charities wouldn't offer a DMP because you are currently solvent on a monthly basis. 

So you need to decide between you whether you default and pay off a DMP, or whether you want to knuckle down and clear this without the defaults? If you're aiming for the latter, then clear that expensive OD and check what rate you are paying for the other one. 

It is important that you do not have joint bank accounts, as that links you in the financial world. So your high debt and defaults wreck her credit records. So close the joint one.

Once you have a new basic account where you have no debts, if you are going to DMP transfer your income and the essential DDs to your new account .

First check with HR about dates when they need notice to reallocate your salary, then manually move the DDs. Do not use the switch facility as that will set up all the DDs paying your creditors and you are back to square one.

Hey ok, sorry if I missed this part out (and for being an idiot) but the mortgage is actually joint and has been for about 15 years, so won't we pretty much linked anyway?

On that basis, is there any sense in closing the joint account still?

RAS

The joint mortgage does link you, but joint "consumer" accounts have far more impact on your partner's credit record.

You are both jointly and severally responsible for the mortgage, but that is backed by the property that could be sold to cover the debt if need be.

That's different to your partner having joint and several responsibility for a joint account, for which they could be fully liable if you renege or die etc. 

Edit: And obviously, if you default on any other consumer debts, that affects the standing of the joint account. Whilst you are much less likely to default on the mortgage.

ManyWays

Debt charities are very likely to suggest a DMP as that does not look a sustainable budget: 

Groceries etc. ......................... 300  way too low for a family of 4. Debt charities wouldn't blink at twice that amount if its including toiletries, cleaning stuff etc not just food

Clothing................................ 20  also way too low as kids keep needing new shoes and clothes and Adults need things replacing over the time it will take to clear your unsecured debts.  Suggest you put at least £80 in. 

Petrol/diesel........................... 0 nothing? is this all on work expenses? 

Medical (prescriptions, dentist etc)....  you need something in for the odd prescription, dentist, opticians

Contents insurance...................... 0 not a good idea

Haircuts................................ 10 for both of you? 

Entertainment........................... 10 unrealistic

Emergency fund.......................... 0 you have to have something, as a house owner there are always repairs or a white good going wrong or new furniture needed. 

ALSO your monthly debt payments look low for the balances. Are they the reduced amounts you have negotiated? Paying a reduced amount means you would definitely qualify for a DMP.

BUT how have you managed to save up £12,000?  Is there something big that isn't showing in your SoA?

budg13

Ok, understood, I obviously need to go through this SOA again. I did all of this back in April and provided to all creditors which I suppose is why they were all able to agree reduced payments in-line with what I could afford.

That does explain the low debt payments, yes.

As for the savings, I earn commission in addition to my salary but instead of having the commission paid monthly, I've asked my employer to hold it in abeyance so it can accrue. I can have it released (and duly taxed PAYE) as and when required. I.e. in the instance of needing to pay off a creditor for example. At least that's the plan, anyway.